Markets pare earlier losses, helped by Aug auto sales

The Dow fell 54, advancers over decliners 3-2 & NAZ gained 8 aided by strength in Apple (see below).  The MLP index was flat at 397 & the REIT index rose 1+ to the 268s.  Junk bond funds drifted lower as did Treasuries.  Oil fell as US & euro-area manufacturing contracted in Aug, raising concern that slower economic growth will reduce demand.  Gold topped $1700 for the first time since Mar on speculation that a sluggish global economy will spur central bankers to boost monetary stimulus, increasing demand for the metal as an inflation hedge.

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Treasury yields:

U.S. 3-month	0.091%
U.S. 2-year	0.230%
U.S. 10-year	1.577%

CLV12.NYM

...Crude Oil Oct 12

....95.24

... 1.23  (1.3%)

Apple invited reporters to a news conference next week in San Francisco with a message that suggests that it will reveal the iPhone 5 (as expected).  The invitation shows a big "12," for Sep 12, casting a shadow in the shape of a "5."  Various unconfirmed reports have pointed to Sep 12 as being the day the new phone is shown off.  It is expected to go on sale a week or 2 later & is expected to have a taller screen & the ability to access the latest wireless data networks in the US.  It should set sales records.  Other unconfirmed reports say AAPL will reveal a smaller version of the iPad, taking on competitors like the Kindle Fire from Amazon (AMZN), which has nibbled at the iPad's dominance in the tablet category.  On Wed, Nokia & Motorola are holding events of their own in NY, apparently to reveal their latest products ahead of the iPhone launch.  The stock rose 10 to 675, 5 below its record high.

Apple Announces Sept. 12 Event as New IPhone Anticipated

Apple (AAPL)

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Photo:   Yahoo

Strong pickup demand fueled a big jump in US auto sales last month.  GM's Aug US sales rose 10% compared with a year earlier, while Ford (F) sales rose 13% & Chrysler's 14%.  Most automakers reported strong gains as Americans flowed into showrooms, drawn by model-year closeouts, low-interest financing & appealing new models.  Overall sales are expected to rise 20% when companies finish reporting.  Pickups, traditionally the top sellers in the US, drove much of the business, thanks to a recovering housing market.  Sales of Ford's F-Series trucks rose 19%, while Chrysler's Ram jumped by the same.  GM's pickups, the Chevrolet Silverado & GMC Sierra, among the oldest trucks in the market, saw a 6% sales increase.  Asian companies & Germany's Volkswagen did well in car sales.  The overall increase was due mainly to pent-up demand as consumers & businesses were forced to replace aging cars & pickup trucks, said Yingzi Su, GM's senior economist.  The average age of a vehicle on US road is approaching 11 years.  Aug sales could hit more than 1.2M, up 20% from a year earlier.  The annual pace could reach 14.6M.  For pickups, a better housing market appeared to be the driver as builders are getting more permits to start home construction & they have been breaking more ground on projects.  The stock slipped pennies, just above its yearly lows.

Pickups drive US auto sales in August AP

General Motors (GM)

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Photo:   Yahoo

Construction spending in the US fell in Jul from Jun by the largest amount in a year, weighed down by a big drop in home improvement projects.  But spending on construction of single-family homes & apartments increased again, a hopeful sign for the modest housing recovery.  The Commerce Dept said that overall construction spending declined 0.9% in Jul.  It followed 3 months of gains, which were driven by increases in home & apartment construction.  The Jun decline left spending at an annual rate of $834B, nearly 12% above a 12-year low hit in Feb 2011.  But construction activity is roughly half of what is considered to be healthy.  Spending on residential construction fell 1.6% in Jul from Jun to an annual level of $264B, dragged lower by a 5.5% decline in home improvement projects.  Spending on single-family homes rose 1.5%, the 4th straight monthly gain, & spending on apartment construction was up 2.8%, the 9th straight gain.  Still, the construction industry remains weak.

US construction spending fell 0.9 percent AP


Buyers returned after 2PM, but selling returned in the last hour of trading.  The AAPL announcement brought out the buyers.  The US economy remains iffy at best while the euro area looks very bad with a recession & trying to fix many debt messes.  The euro biggies are struggling to solve major financial problems & should issue a statement in a couple of days.  They are far from united, nobody knows what will come from their meetings.  The 13K floor held for the Dow.

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Higher markets on better than expected April auto sales

Dow rose 93 to new highs not seen since 2008, advancers ahead of decliners 4-1 & NAZ gained 33.  Bank stocks led the charge with the Financial Index up 3+ to 211 (one month high).  The MLP index continues on its winning ways, up a fraction to 399, & the REIT index rose 3+ to almost 264, a new high since the middle or 2008.   Junk bond funds inched higher while Treasuries pulled back after recent gains.  Oil & gold are marking time.

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Treasury yields:

U.S. 3-month	0.097%
U.S. 2-year	0.262%
U.S. 10-year	1.937%

CLM12.NYM

...Crude Oil Jun 12

...104.75

... 0.12  (0.1%)

GCK12.CMX

...Gold May 12

......1,667.60

... 4.20  (0.3%)

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Construction spending barely rose in Mar as investment in public projects dropped to a 5-year low, according the Commerce Dept which could see the Q1 economic GDP estimate lowered.  Construction spending edged up 0.1% to an annual rate of $808B, after a revised 1.4% drop in Feb.  Expectations had been for construction spending to rise 0.5% after a previously reported 1.1% decline in Feb.  But overall construction spending was up 6% compared to Mar 2011.  Private construction spending increased 0.7% after falling 1.9% in Feb.  Spending on residential projects rose 0.7%, partly reflecting home improvements.  Investment in multifamily residential projects fell 3.1%, while outlays for single-family buildings increased 3.8%.  Residential construction grew at its fastest pace since Q2 2010.  Private nonresidential construction rebounded 0.7% in Mar, breaking 2 straight months of declines.  Spending on public sector construction fell 1.1% to $276B, the lowest level since Feb 2007 as outlays on state & local gov projects dropped 1.6% to the lowest level since Nov 2006.  More mixed data on this important sector for the economy.

Construction Spending Up, Investment in Public Projects Hits Five Year Low

Reuters

Photo:   Bloomberg

Pfizer, a Dow stock, reported higher-than-expected quarterly earnings as improved profit margins & strong sales of its Lyrica nerve-pain drug partly offset plunging demand for its Lipitor cholesterol fighter which is facing cheaper generic rivals.  Sales of Lipitor fell 42% to $1.4B.  EPS was 24¢ compared with 28¢ last year (when results suffered because of a litigation charge & costs of revamping research operations).  Excluding special charges to boost productivity & address legal matters, Pfizer earned 58¢, compared with 60¢ last year but better than 56¢ expected.  PFE is now eagerly awaiting US approvals of 2 potential blockbuster treatments: blood clot preventer Eliquis & tofacitinib to treat rheumatoid arthritis.  In the meantime, it's squeezing growth out of older medicines, including Lyrica, whose sales jumped 16% to almost $1B, fueled by growing demand in Japan.  Sales of painkiller Celebrex rose 7% to $634M, while sales of arthritis treatment Enbrel rose 3% to $899M.  Premarin, its line of female hormone replacement drugs, topped forecasts, with sales rising 11% to $261M.  But sales of its Prevnar vaccines against pneumonia & other infections fell 6% to $941M due to fewer children getting booster shots during the period & a lower US birth rate for eligible patients versus a year ago.  Total revenue fell 7% to $15.4B, just below expectations of $15.47B.  The stock fell 13¢.

Pfizer Profit Beats Estimates as Drugmaker Readies Animal Health Spin-Off

Pfizer, Inc. (PFE)

Photo:   Bloomberg

Chrysler, Ford & General Motors reported Apr sales that exceeded estimates.  Chrysler sales climbed 20% to 141K light vehicles.  Ford deliveries slipped 5.1% to 179K cars & light trucks, & GM sales fell 8.2% to 213K.  But they beat estimates of a 16% gain for Chrysler, 5.7% drop for Ford & 9% decline for GM.  Chrysler added 2.1 percentage points of market share in Q1 compared with a year earlier and has reported 11 consecutive months of year-over-year sales gains exceeding 20%.  CEO Marchionne is counting on the new Dodge Dart compact, which begins production this week, to boost deliveries later this year after a 5-month streak of 30% sales gains.  Toyota's (TM) US light vehicle sales rose 12%, better than the average estimate for a 10% gain.  GM also raised its forecast for full-year US light-vehicle sales to 14-14.5M, up from 14M.  The company cited “higher than expected” Q1 industry sales & expectations the US economy will keep growing.  Autos are leading the strong manufacturing performance in the US.

Chrysler Leads U.S. Automakers Beating Sales Estimates

General Motors Company (GM)

Ford Motor Company (F)

The bulls are back from their long holiday weekend & bidding up prices.  Bank stocks deserve special attention with prices near highs reached on at the end of Mar.  MLPs are also recovering after a sluggish period in Mar & much of Apr.  And REITs are at multi year highs.  Europe debts woes have vanished, although Spain looks iffy, & a slowdown in the US economy does not bother investors.  Dow is at a 4 year high, making the bulls very happy.

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Mixed markets on mixed economic data

Dow slipped 3, advancers ahead of decliners 2-1 & NAZ rose 7.  Higher bank stocks pushed the Financial Index up a fraction in the 213s (close to its recent highs).

The MLP index fell 1+ to the 390s while the REIT index was essentially even at its yearly highs of 254.  Junk bond funds were mixed & Treasuries rose on mixed economic news. Oil & gold had modest changes.

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Treasury yields:

U.S. 3-month	0.066%
U.S. 2-year	0.329%
U.S. 10-year	2.182%

CLK12.NYM

...Crude Oil May 12

...102.65

... 0.37

(0.4%)

GCJ12.CMX

....Gold Apr 12

.........1,677.10

... 7.80

(0.5%)

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Photo:   Bloomberg

Unemployment in the Euro-region rose to the highest in more than 14 years & manufacturing contracted for an 8th month, adding to signs the economy slipped into a recession in Q1.  The jobless rate in the 17-nation euro area rose to 10.8% in Feb, up from 10.7% a month earlier, according to the EU statistics office.  That’s the highest since Jun 1997 & close to the record of 10.9%.  A manufacturing gauge, based on a survey of purchasing managers, fell to 47.7 in Mar from 49, according to Markit Economics.  Europe's economy has been mired in a fiscal crisis for more than 2 years, forcing companies to cut jobs & pushing economies from Spain to Ireland into recessions.  To help contain the crisis, finance ministers decided last week to boost the rescue-lending capacity to €800B ($1.1T), a figure that includes €300B already committed to Greece, Ireland & Portugal.  The ECB said that the firewall is “sufficient.”  In Germany, Europe’s largest economy, the jobless rate held at 5.7% in Feb based on a trend component while unemployment in France remained at 10%.  In Italy, the jobless rate rose to 9.3% from 9.1% & Spain had the highest rate at 23.6%.  Markit’s euro-area manufacturing gauge dropped to a 3- month low in Mar.  A German indicator fell to 48.4 from 50.2 the previous month, while in France the number slipped to 46.7 from 50.  Europe is an important market for US companies & multi national's have major investments in European subsidiaries.

Euro-Region Unemployment Surges to 14-Year High, Nears Record


The news is better in the US.  The Institute for Supply Management said that its index of manufacturing activity rose to 53.4 in Mar, up from 52.4 in the previous month. Readings above 50 indicate the sector is expanding.  A measure of employment in the sector rose to a 9 month high, a sign that factories are stepping up hiring & manufacturers are already a big source of job gains.  They've added more than 100K jobs in the past 3 months, about one-seventh of all net gains.  Businesses also ordered more durable goods in Feb, after a steep drop the previous month, a report last week showed.  Greater demand for machinery, computers, autos & aircraft drove the increase.  Orders for "core" capital goods, a key measure of business investment plans, also rose after falling in Jan by the most in a year (after an investment tax credit expired).  A recovery in auto sales has been a big reason for the strength in manufacturing.  Americans delayed auto purchases during the recession which led to sharp increases in car sales as the economy recovered.  More auto manufacturing boosts output in an array of industries, including steel, tire makers, & other parts suppliers.

Manufacturing in U.S. Expanded at a Faster Pace in March


However US builders trimmed activity for a 2nd straight month in Feb, pushing construction spending down by the largest amount in 7 months.  There was widespread weakness with spending on home building, office construction & gov projects all dropping.  The Commerce Dept reported that construction spending fell 1.1% in Feb after a drop of 0.8% in Jan which was revised down from an initial estimate of a decline of only 0.1%.  With the back-to-back declines, construction spending stood at an annual rate of $809B in Feb, just 6.1% above a low hit in Mar 2011 & about a third lower than the high hit during the housing boom.  The weakness last month came from a 1.5% drop in construction of single-family homes which offset a 2% rise in apartment construction.  Spending on non-residential construction projects dropped 1.6% following a 2.3% decline in Jan.  The Feb decline reflected weakness in office construction, hotels & shopping malls.  Gov construction dropped 1.7% to an annual rate of $282B with state & local building projects down 2.1% while spending by the federal gov rose 1.9%.  This data mutes other recent more favorable housing data.  The housing recovery is fragile & stumbling.

Construction Spending in U.S. Unexpectedly Declined in February


Q2 started off with a yawn from the markets as markets are back to spinning their wheels.  Dow had broken thru the 13K ceiling in a convincing fashion, but then the bulls went home.  This may reflect nervousness about earnings seasons, even though expectations are not high.  The big jobs report will be released on Fri, another unknown to worry about.

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